DALLAS — Lenders have repossessed a 33-acre retail and entertainment complex adjoining Glendale, Ariz.’s National Hockey League arena after a failed foreclosure auction.
The retail center known as Westgate City Center reverted to iStar Financial, a New York-based real estate investment trust, after failing to attract a minimum bid of $40 million on Monday.
The minimum bid would have been less than half of iStar’s $97.5 million loan for the facility. The company has not announced plans for the property.
Another 95-acre section of the development that contains parking lots and land owned by Credit Suisse is expected to go to foreclosure auction in November. Credit Suisse lent the developer $202 million.
While the adjacent Jobing.com Arena was built by Glendale with about $180 million of revenue bonds and certificates of participation, Westgate was built by Ellman Co., a private developer headed by Steve Ellman.
The lenders declared Ellman in default earlier this year.
Ellman — who sold the city on the idea of building the arena for the NHL’s Phoenix Coyotes in 2001 after a rebuff from Scottsdale — promised to develop Westgate as a source of sales tax revenue.
The developer was fined $1 million when he failed to deliver any part of the project by the anticipated 2004 start date, one year after the hockey arena opened. The first section of Westgate opened in 2006, but the financial collapse of 2008 was less than two years away.
In 2009, Jerry Moyes, Ellman’s former partner and owner of the Coyotes, put the team in bankruptcy with plans to move it under a prearranged buyer to Canada.
Alarmed by the prospect of losing the team and financing a mostly vacant arena, Glendale sought a new owner willing to turn the team’s finances into positive territory.
To prevent a move from Glendale, the NHL bought the team and aided the search for a new owner.
A deal with Chicago investor Matthew Hulsizer that would have required a city bond issue of $116 million fell through after a threatened lawsuit from the Goldwater Institute, a conservative think tank in Scottsdale. Now, the city is in talks with other prospective owners, but no deal has been announced.
While the city invested its own sales taxes to back the hockey arena bonds, it got an assist from the state-financed stadium for the Arizona Cardinals built in the same area.
Glendale was required to use $9.5 million of general obligation bonds to build streets and related infrastructure around the stadium.
However, the Arizona Sports and Tourism Authority issued $302 million of sales tax revenue bonds while the Cardinals added $142 million to build the stadium that opened in 2006.
Despite the uncertain future of the arena and Westgate, holders of the arena debt bear slight risk because the bonds are backed by the city’s broader sales tax revenue.
On June 16, Standard & Poor’s affirmed its AA-plus rating on the COPs and its AA rating on Western Loop 101 Public Facilities Corp.’s third-lien excise-tax revenue bonds used for the arena.
Standard & Poor’s placed the debt on CreditWatch with negative implications on Feb. 24 when the city was planning to issue $116 million of excise-tax revenue bonds to finance the sale of the Coyotes to Hulsizer.
Moody’s Investors Service has not reversed its downgrade on the city when it was still planning to issue the bonds. The city’s GO rating was revised to Aa2 from Aa1.
The senior-lien excise tax rating was lowered to Aa3 from Aa2, and the second-lien excise tax rating fell to A1 from Aa3. Glendale’s third-lien excise rating dropped to A2 from A1.